Myanmar’s generals in coming years could be entitled to more than US$700 million from military-controlled mobile network operator Mytel, according to a confidential document published online by whistleblower website, Distributed Denial of Secrets.
A Mytel internal forecast shows that profits from its millions of customers in Myanmar are expected to soar this decade.
The military stands to collect enormous sums because it owns more than 28 per cent of Mytel’s shares.
Military cash windfall
Mytel’s profit forecast dates from January 2017. It was submitted to Myanmar’s investment authority as part of the company’s application for an official licence.
The forecast predicted that Mytel would lose money for its first four years of operation, due to the cost of building up its network, but its profits would grow fast after that.
The projections suggest that the Myanmar military’s shareholding could yield it US$270 million in Mytel’s fifth to ninth years of operation and a further US$450 million in the five years after that.
It is not clear which calendar years the projection refers to or when profits might actually start to flow to the shareholders who also include Viettel, a telecoms company owned by Vietnam’s defence ministry
But Vietnam’s People’s Army Newspaper has reported that Mytel became profitable in early 2020, two years earlier than expected.
So Mytel’s shareholders, including the Myanmar military, may start getting dividends as early as this year.
Mytel is not a normal commercial venture. It represents a tie-up between the militaries of Myanmar and Vietnam. Mytel gives Myanmar’s generals access to money, technology, and data which they can use for military purposes, as well as to prop up their brutal military junta, following an unlawful coup on February 1.
Mytel’s connection to the military has triggered concern among some of its business partners and investors.
The Singapore-based payments firm Coda last week announced they had “deactivated” Mytel from its payment channels, according to Reuters. This means that Mytel customers cannot make purchases using Coda’s services.
One of Mytel’s domestic investors, International Power Generation (IPG) is distancing itself from the phone company.
IPG is an investor in Myanmar National Telecom Holdings (MNTH), a consortium of local companies which owns shares in Mytel.
IPG announced last week that it “has taken the first steps to exit from MNTH in a responsible manner.”
IPG added: “We request that IPG be excluded from the list of Significant Business Associates of the military.” The list is published on the Justice For Myanmar website.
Justice for Myanmar welcomes this decision by IPG and calls on all other shareholders in MNTH to do the same.
The Mytel shareholders
A 28 per cent shareholding in Mytel belongs to the Myanmar government, which invited state-owned entities and companies to bid to hold these shares. At the time, the government was led by the Union Solidarity and Development Party (USDP), a proxy of the Myanmar military.
In February 2016 the USDP-led government decided that the “government shareholder” in Mytel would be Star High, a small company ultimately controlled by the Myanmar military, under the office of the quartermaster general.
Star High was registered in March 2015 and appears to have been created to hold the military’s equity in Mytel. According to the Mytel website, Star High is as subsidiary of Myanmar military conglomerate Myanmar Economic Corporation, although shares in Star High are held by individuals.
The appointment of Star High as the government shareholder means that profits earned from this 28 per cent stake will flow to the military, rather than to the national budget.
And the military’s share of Mytel’s future profits could be even higher than what the leaked forecast suggests as Star High’s stake is now larger than 28 per cent.
This is because Star High has acquired some of the 23 per cent stake previously owned by the other domestic investor, MNTH.
The remaining 49 per cent of Mytel is owned by Viettel, a conglomerate under Vietnam’s Ministry of National Defence.
MNTH has handed over some of its shares to Star High because it has struggled to pay its own financial contribution to Mytel.
MNTH’s accounts for the year to March 2018, which have been seen by Justice for Myanmar, show that out of its initial 23 per cent stake in Mytel, 6.5 per cent was actually paid for by Star High.
Then MNTH “offered” Star High another 4.5 per cent of Mytel in return for “financial assistance.”
Full details of these transactions are not explained in the accounts. But the disclosures in MNTH’s financial statements imply that the military’s stake in Mytel, via Star High, may now be 39 per cent compared to its original 28 per cent, meaning that it will capture even more of Mytel’s profits.
The same accounts show that MNTH had borrowed US$10 million from Innwa Bank which, like Star High, is controlled by the military-run MEC. In other words, MNTH appears to have relied heavily on financial backing from the military’s business empire.
Other leaked documents underline Mytel’s dependence on support from the Vietnamese state.
Viettel agreed to provide the lion’s share of the US$1.38 billion needed by Mytel in its first three years by investing US$169 million in its shares and lending it up to US$903 million.
As well as providing money, Viettel supplied managers and technical experts from Vietnam.
Viettel’s global arm has investments in nine other low- or middle-income countries around the world. But its investment in Myanmar is by far the biggest.
Mytel could also prove highly lucrative for Viettel which, in addition to its share of profits, is paid interest on its loan and a management fee of two per cent of Mytel’s annual turnover.
Mytel has also had dealings with Vietnamese banks. For example, a leaked record dated November 2020 outlines a US$40 million, five-year loan to Mytel from Vietnam’s TP Bank. Viettel will guarantee 49 per cent of the loan – the same size as its Mytel shareholding. TP Bank’s shareholders include the International Finance Corporation of the World Bank Group.
Star High: money for nothing?
If the leaked profit forecast is correct, Myanmar’s military will make an enormous fortune from its Mytel shares.
But it isn’t clear where Star High got the money from to buy these shares.
Star High was obliged to spend US$96 million over three years on buying Mytel’s shares and lend Mytel another US$96 million.
However, a leaked bank statement shows that Star High’s bank balance as of September 2016 was only three billion kyat or just over US$2 million.
What is clear is that the dividends the military will receive from Mytel belong to the people of Myanmar and must be used for their benefit.
Without immediate action, Mytel dividends will fuel a lucrative slush fund for the Myanmar military and its generals, who are responsible for genocide, war crimes and crimes against humanity. Mytel profits will enable their continues and routine breaches of international human rights and humanitarian law.
Justice For Myanmar reiterates our call for all businesses to cut ties with the Myanmar military, including Mytel. Now is the time to stand with the people of Myanmar.